It is no secret that the retail market has faced significant challenges over recent years. With the rise in e-commerce came a prediction of the decline of the brick and mortar retail store. This prediction was reinforced with major retail brands, such as Barneys, Lord & Taylor, and Century 21 facing bankruptcy. Pair that with shrinking discretionary budgets, a global pandemic and ever-changing consumer preferences, many claimed the retail sector was on its death bed. Instead, what we have seen is an industry that is well versed at adaptation and continues to navigate these changes.

According to Cushman & Wakefield’s most recent report, “many markets with large urban centers saw positive demand in Q3, including San Francisco, Dallas/Ft. Worth, Boston, Chicago, New York and Washington D.C.”  In fact, the report also showed the “national vacancy rate remains near a historic low of 5.4%.” In the wake of much doubt about the future of retail, we’ve seen retail adapt and prosper with historically low vacancy rates. Now is no different with the retail market’s newest adaptation, and its strategy may result in retail being more permanent than ever.

Brandon Isner, CBRE’s head of Retail Research for the Americas stated, “Retailers today have that advantage where they can use digital solutions to build [their] brand rather than just throw stores everywhere like they did in the 70s, 80s and 90s. It means brands can be selective about where they open physical locations.” But, with vacancy rates so low, low supply of high-quality retail space in desirable markets creates a challenge for many retail tenants looking for space, especially when these tenants have the ability to be selective about their locations. For example, New York City’s Fifth Avenue, while a consistent coveted location for retail tenants, has become increasingly competitive. Companies are willing to pay rents that reflect what a worthwhile investment the physical location is to them because these locations are not just storefronts for them to sell their goods anymore. Companies are using these primetime storefronts as a way to have a unique presence and further brand awareness. Many brands create elaborate displays and structures in order to create that presence and brand awareness, investing major capital in the spaces they occupy.

“It’s no longer just about securing space but leveraging limited spaces to create a unique and memorable brand experience.”

Recently, there has been a shift towards more permanence. More and more companies have changed from renting that ever desirable space to buying it. At the end of last year, Prada, which had leased their space since 1997, bought their flagship store for $425 million dollars. The Kering group, owners of Gucci, Balenciaga, and Alexander McQueen, also purchased space in New York City for $963 million. The shift towards purchasing retail space rather than leasing is not reserved only for luxury brands either. Most recently, Ikea partnered with Extell Development in their newest project, with Ikea purchasing their retail space at the ground level of the project. According to the New York Times, Uniqlo, as well as Geshary Coffee, are also in contract to purchase their retail space.

With vacancy rates low and competition for desirable space high, purchasing the space they would otherwise lease provides security to companies who otherwise have rising rental rates paired with the inevitable expiration date on their space. Moreover, with the additional capital invested into these properties becoming ever increasing, the investment isn’t lost at the end of the term. Therefore, retail tenants becoming owners of the space they have historically leased may be the newest adaptation to the retail market that we will be seeing more of in the future. 

Failing to file a notice of claim pursuant to Civil Practice Law and Rules (“CPLR”) Section 9802 can become a trap for the unwary litigator who commences a hybrid proceeding-action (Article 78 claim(s) combined with plenary cause(s) of action) or a strict Article 78 proceeding against a village (see South Nyack Police Assn. v Village of South Nyack, 229 AD3d 635 [2d Dept 2024]).

Section 9802 provides that “no action shall be maintained against the village upon or arising out of a contract of the village” unless a notice of claim has been served. Although this language appears limited, Courts have interpreted it more broadly. Thus, a party bringing any action against a village must plead and prove, as a condition precedent to the litigation, that the party served a written verified notice of claim. The party’s failure to comply with this requirement can be fatal to the claim(s) asserted.

In South Nyack Police Assn., police officers and their association commenced an Article 78 proceeding against the village, mayor, and trustees, seeking to compel the village to compensate the officers for unused sick time. The Supreme Court, Rockland County, converted the Article 78 proceeding into a plenary action for breach of contract and declaratory relief, and denied village’s motion to dismiss. Upon reargument, the Supreme Court granted the village’s motion to dismiss based on the officers’ and association’s failure to comply with Section 9802 (i.e. the officers and association failed to serve a notice of claim).

The officers and association appealed and argued that they sent a letter to the mayor providing notice of their claims. The Appellate Division, Second Department, rejected this argument, affirmed dismissal, and held that the officers’ and association’s letter to the mayor did not constitute a notice of claim because it was not filed with the village clerk, was not verified, did not identify the “claimants,” and did not refer to the contract claim (requisites for notices of claim).

Furthermore, in BT Holdings, LLC v Village of Chester, 162 AD3d 881 (2d Dept 2018), lv denied, 32 NY3d 913 (2019), the Court was faced with a “hybrid proceeding pursuant to CPLR article 78 and action for a judgment declaring that Local Law No. 2 of 2016 of the Village of Chester (hereinafter Local Law No. 2) is void and of no force or effect.” The village moved to dismiss the petition-complaint for failure to serve a notice of claim. The Supreme Court, Orange County, granted the motion to dismiss the Article 78 claims in the petition, but denied the motion to dismiss the plenary causes of action in the complaint. The village appealed the latter.

The Appellate Division, Second Department reversed, granted that portion of the motion to dismiss, and held “the notice of claim requirements of CPLR 9802 apply to the causes of action for declaratory relief” and that “the Supreme Court should have granted that branch of the defendants’ motion which was pursuant to CPLR 3211(a) to dismiss the causes of action for a judgment declaring that Local Law No. 2 is void and of no force or effect.”

Under New York law, notice of claim statutes are intended to foster early investigation of claims and to facilitate settlements prior to initiation of litigation.  CPLR 9802 is clear: “no action shall be maintained against the village …unless the same shall be commenced within one year after the cause of action therefor shall have accrued.”

The Court of Appeals has held that a failure to plead and prove compliance with CPLR 9802 requires dismissal of the action (see Salesian Society, Inc. v. Village of Ellenville, 41 NY2d 521 [1977] [compliance with CPLR 9802 provisions is a condition precedent to be pleaded and proved by the one bringing suit]).

Notably, CPLR Section 9802 does not expressly require a notice of claim before bringing an Article 78 proceeding against a village where the claim(s) does not resound in contract or declaratory relief (see Caggiano, 44 AD2d 828 [2d Dept 1974] [before bringing an Article 78 proceeding to recover money seized by the police during an arrest, no notice of claim under this section is required]). Takeaway: when litigating against a village, file a notice of claim. Better safe than sorry.

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Fabian Blank, Unsplash

The good-guy guaranty is a commonly used form of security in the field of commercial leasing.  Despite appearing straightforward, the fundamentals of a good-guy guaranty are often misunderstood by landlords, tenants and brokers.  Failing to understand the implications of a good-guy guaranty may result in unintended consequences for the landlord, the tenant and the guarantor. 

Guaranties are an important component of commercial lease negotiations.  Before signing a lease, a landlord will typically review and assess a tenant’s financial information.  If the tenant doesn’t have sufficient credit, the landlord may require a third party to guaranty the lease.  In the context of leasing, a guaranty is a third party’s promise to pay and perform the tenant’s obligations arising under a lease.  

If the landlord requires a full guaranty, the guarantor will be asked to guaranty all of the tenant’s lease obligations.  Alternatively, a landlord may ask for a limited guaranty, of which there are several variations.  Some limited guaranties cap the guarantor’s exposure to a certain dollar amount, while others may terminate after a period of time. 

Continue Reading Understanding Good-Guy Guaranties: What Every Landlord and Tenant Should Know
The most powerful word in the world pops up everywhere. Ironically, this is on Sandown Pier on the Isle of Wight (UK) — a place that has not changed for 30 years.
Ross Findon, Unsplash

The Upcoming 7th Revision to the Title Insurance Rate Service Association (TIRSA) Rate Manual is effective on October 1, 2024

What is TIRSA?

The Title Insurance Rate Service Association (TIRSA) is an organization licensed by the New York State Department of Financial Services that provides guidelines for the pricing and availability of title insurance premiums and products in New York State. Since 1993, TIRSA has published, and revised, its TIRSA Rate Manual, which sets forth rules, definitions, risk classifications, premiums and rates for title insurance policies, endorsements and other forms used by members of TIRSA. Notably, any deviations from the TIRSA Rate Manual must be approved by the Superintendent of the New York State Department of Financial Services. The 7th revision to the TIRSA Rate Manual goes into effect on October 1, 2024.

Continue Reading A (title) Change Is Gonna Come
Two,White,Geese,Stand,On,Green,Grass.,Poultry,,Breeding,Geese.

In City of New York v Ball, 2024 NY Slip Op 24179 [Sup Ct, Albany County 2024], the Albany County Supreme Court upheld a determination of the Commissioner (“Commissioner”) of the Department of Agriculture and Markets (“Department”) that concluded the City of New York’s (“City”) local law banning food establishments from selling or serving foie gras and other force-fed products (“Foie Gras Ban”) unreasonably restricted and regulated farming operations in “upstate” New York.

This case concerned preemption and a conflict between State and local policies. The Court addressed the Commissioner’s/Department’s State agency power to effectively overrule local elected officials and the will of their electorate. At issue was whether an indirect, extraterritorial restriction or regulation falls within the purview of the farming protection framework, given that City’s Foie Gras Ban affected farming operations situated in Sullivan County – approximately 70 miles north.

Continue Reading Foie Gras Faux Pas: City Runs A-fowl of State Farming Protections

OVERVIEW

The Shawangunk Ridge is a cluster of bedrock in upstate New York popular for its scenery and outdoor recreation. The Town of Gardiner’s (“Gardiner”) Shawangunk Ridge Protection District (“SRPD”) protects the scenic and ecological values of the Shawangunk Ridge and requires, among other things, a special use permit for development.

A property owner sought to subdivide and develop property situated within the SRPD; to wit: subdivide a 108-acre lot into two lots, maintain an existing dwelling on one lot, and construct a new dwelling on the second lot. The developer sought and obtained a special use permit and subdivision approval from the Gardiner Planning Board (“Planning Board”). Before the approval, the Planning Board issued a negative declaration pursuant to the N.Y. State Environmental Quality Review Act (“SEQRA”). Notably, the owner himself, a trained biologist and forestry professional, performed his own conservation analysis with respect to the Planning Board’s SEQRA review.

The Friends of the Shawangunks, an environmental conservation organization (“Friends”), commenced an Article 78 proceeding challenging the special use permit, subdivision approval, and negative declaration. The Supreme Court, Ulster County, dismissed the proceeding on the grounds that Friends lacked standing, and Friends appealed. On appeal, the Third Department reversed, held Friends had standing, and addressed the merits.

Continue Reading Friend of the Shawangunks v. Town of Gardiner Planning Board: Litigation Concerning a Popular Outdoor Recreation Area Prompts the Third Department to Address Organizational Standing, Special Permit Criteria, and Whether Expert “Bias” is a Consideration Under SEQRA

On May 13, 2024, the U.S. Environmental Protection Agency (“EPA”) and New York State officials broke ground on a clean water infrastructure project at Plant 6 of the Hicksville Water District, located in Nassau County.  This groundbreaking step represents just the initial phase of a comprehensive effort to implement a $9 million treatment system to remove a number of hazardous per- and polyfluoroalkyl substances (“PFAS”), also known as “forever chemicals,” from Hicksville’s water supply, and secure clean drinking water for local residents. 

PFAS are used in food packaging and in products that resist heat, oil, stains, grease and water, such as nonstick cookware, water-repellent clothing and some cosmetics, among many other industry and consumer products.  PFAS exposure has been linked to, inter alia, certain cancers, increases in cholesterol levels, changes in liver enzymes, and immune system and development damage to infants and children.

Continue Reading Navigating the Waters: A Long Island Community’s Response to the EPA’s PFAS Directive

Recently, in On Point Window Treatment, Inc. v. 208 Clinton Place, LLC, 2024 N.Y. Slip Op. 50241 (N.Y. Sup. Ct. 2024), the Kings County Supreme Court held that even when paired with an insurance procurement requirement, a landlord could not rely on an indemnity clause negotiated into its lease to exempt such landlord from liability.

Under General Obligations Law § 5-321 “agreements that purport to exempt landlords from liability for negligence are void” and unenforceable. However, it has long been understood that this does not apply “when a lease provision arrived at an arm’s length negotiation between two sophisticated parties requires both parties to allocate the risk of liability to third parties between themselves through insurance.” See On Point Window Treatment Inc. at 6 (internal citations omitted). The Court of Appeals reaffirmed this concept in 2006 when they stated in Great N. Ins. Co. v. Interior Constr. Corp., that “a commercial lease negotiated between two sophisticated parties who included a broad indemnification provision, coupled with an insurance procurement requirement” was enforceable, and held that when “a lessor and lessee freely enter into an indemnification agreement whereby they use insurance to allocate the risk of liability to third parties between themselves, General Obligations Law 5-321 does not prohibit indemnity.” See Great N. Ins. Co. v Interior Constr. Corp. (7 NY3d 412 [2006]).

Landlords and their counsel have relied on this structure of coupling an insurance requirement on the tenant with a negotiated indemnification clause as a way to limit a landlord’s exposure under a lease. However, the On Point Window Treatment, Inc. decision suggests that landlords and their counsel should be wary in their reliance on this structure.

In On Point Window Treatment, the tenant alleged that it “sustained significant damage to its leased space” as a result of the landlord’s negligence in maintaining the roof. See On Point Window Treatment, Inc. at 4. The landlord, in its defense, relied on the finding of the Court of Appeals in Great N. Ins. Co. and turned to its indemnification provision and insurance requirement of tenant in the lease. Such indemnification exempted the landlord from, among other things, liability for any damage caused by the roof. In addition, the insurance provision in the lease stated that the tenant assumed all risk of loss or damage to its property and was to maintain insurance coverage against such risks. See id. Further, the lease asserted that the landlord would not “incur any liability or responsibility for tenant’s property.” See On Point Window Treatment, Inc. at 4-5. The landlord argued that, because the lease was an “arm’s length negotiation between two sophisticated parties” that “allocate[s] the risk of liability to third parties between themselves through insurance” such indemnification clause should not be prohibited by General Obligations Law 5-321. See id.

However, the court found the opposite. In so holding, the court stated that “the insurance procurement clause was not an agreement to allocate the risk of liability to third persons but rather a means for [landlord] to avoid liability to [tenant] for its own negligence.” See On Point Window Treatment, Inc. at 7. The court ultimately found that the purpose of the indemnity provision was to exempt the landlord from liability for its own negligence, and therefore, violated General Obligations Law § 5-321. See id.

Takeaway: Landlords and their counsel should use caution when relying on indemnification provisions paired with insurance procurement clauses in order to limit liability under a lease.

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On September 22, 2023, Governor Kathy Hochul signed legislation (A.1967/S.5400) amending the Property Condition Disclosure Act (“PCDA”), which effectively eliminates a seller’s option to provide a residential homebuyer with a $500 credit in lieu of a Property Condition Disclosure Statement (“PCDS”). The amendment further requires sellers to disclose property information regarding flood risk, flood history and flood insurance.  This consequential shift is consistent with Gov. Hochul’s implementation of her comprehensive resiliency plan to protect New Yorkers from extreme weather. The amendment goes into effect on March 20, 2024.

This bill goes a long way towards helping give homebuyers the information they need to make informed decisions about one of the biggest financial investments of their lives — their home.

Joel Scata, Natural Resources Defense Council Attorney for Water Initiatives

Elimination of “Opt-Out” Provision

The New York legislature enacted the PCDA to supplement the information provided by professional inspections and tests and searches of the public records conducted by residential homebuyers (New York Sponsors Memorandum, 2001 Ch. 456). The PCDA was also a response to adherence seen in New York’s case law to the doctrine of “caveat emptor” or “buyer beware,” which has long permitted a residential seller to remain silent as to most matters that are not actively concealed by the seller.  Consequently, buyers ended up with the burden of thoroughly inspecting the premises, searching public records and asking sellers the “right” questions about the property.  Despite the introduction of the PCDA, sellers were given the opportunity to “opt out” of providing buyers with a PCDS, if they were willing to pay the price – $500. Unsurprisingly, the $500 credit to the purchaser became the standard, and not the PCDA.

Continue Reading Disclosure Revolution: Legislation Makes Property Condition Disclosure Statements Mandatory, Adding Flood Risks, and Waving Farewell to the $500 Credit
Aerial,Photography,Of,A,River,Swamp,In,A,Wetland,Park

The 2022/2023 State budget included watershed (no pun intended) amendments to the regulations governing New York’s Freshwater Wetlands. It has been published that the changes to the Freshwater Wetlands Act are expected to capture approximately one million acres (1,560 square miles) of previously unregulated freshwater wetlands – the equivalent in landmass of 1/10th the state of Rhode Island.  As part of the move, the New York State Department of Environmental Conservation (“DEC” or “Department”) is seeking information from stakeholders as it considers the revisions to the regulations and develops criteria to implement the Act. 

Continue Reading DEC Seeks Feedback by February 17th as it Considers Revamped Freshwater Wetland Regulations